New Requirements Under Final Disability Claims Regulations

On December 19, 2016, the Department of Labor published final regulations changing the claims procedures for disability benefit claims. The new regulations are effective January 18, 2017 and apply to claims for disability benefit claims filed on or after January 1, 2018.

The new rules apply to disability benefit claims under plans such as a (1) short term disability plan that is governed by ERISA (and not a payroll practice); (2) long term disability plan; or (3) pension plan, 401(k) plan, life insurance plan, severance plan or other plan where the availability of the benefit (e.g., vesting under a pension plan or waiver of premium under a life insurance plan) is conditioned upon the participant being disabled as determined by the plan, unless the finding is conditioned on another party’s determination of disability (such as the Social Security Administration or the LTD insurer).

Checklist of New Requirements

Below is a checklist of the new requirements that will be effective January 1, 2018:

Disability claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of persons making the decision (e.g., decision regarding hire, compensation, termination or promotion cannot be made based on the likelihood that the individual will deny the claim or appeal).

Additional content is required to be included in the claim and appeal denial letters (see checklists below).

Before the plan can issue an appeal denial, the plan administrator must provide the claimant, free of charge, with any new or additional evidence considered, relied upon or generated by the plan, insurer or other decision maker. This new evidence must be provided as soon as possible and in advance of the determination so that the claimant has a reasonable opportunity to respond before that date.

Before the plan can issue an appeal denial based on new or additional rationale, the plan administrator must provide the claimant, free of charge, with the rationale. The rationale must be provided as soon as possible and sufficiently in advance of the date on which the appeal denial is required to be provided to give the claimant a reasonable opportunity to respond before that date.

If the plan fails to strictly adhere to all the claims procedure requirements, the claimant is deemed to have exhausted the administrative remedies available under the plan, and can sue (with no deference to the prior decision). However, there is no deemed exhaustion in the event of de minimis violations that do not cause harm, as long as the plan demonstrates the violation was for good cause or due to matters beyond the plan’s control and the violation occurred in the context of an ongoing, good faith exchange of information between the plan or the claimant.

If the plan violates the claims procedures, the claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted.

The term “adverse benefit determination” will also include any rescission (retroactive termination) of disability coverage with respect to a participant or beneficiary (even if it does not impact a benefit at that time). “Rescission” does not include a failure to timely pay required contributions.

A plan’s notices must be provided in a culturally and linguistically appropriate manner. This means that if a notice of adverse benefit determination is provided in a county where at least 10% of the population is literate only in some non-English language, the notice must offer language assistance services (e.g., translation hotline), provide language assistance in connection with filing claims and appeals, provide a translated notice upon request and provide in all notices a prominent statement in the non-English language about how to access language services.

Action Items

Employers may want to take the steps listed below to be prepared to comply with the new regulations.

Determine which of your plans are subject to the disability claims regulations.

Discuss with insurers or appropriate personnel to ensure the plan’s claims procedures will be in compliance with the new requirements as of January 1, 2018.

Update language in the plan document and summary plan description to reflect the new claims procedure requirements.

Update template claim and appeal denial letters to ensure they will satisfy the new content requirements. See the separate checklists below that will assist you in updating template letters.

Disability Claim Denial Letter Content Checklist

Below is a checklist of claim denial letter content requirements (those not effective until January 1, 2018 are noted).

The specific reason or reasons for the adverse determination.

Reference to the specific plan provisions on which the determination is based.

A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary.

A description of the plan’s review procedures and the time limits, including a statement of the claimant’s right to sue under ERISA following denial on appeal.

If the adverse benefit determination is based on a plan exclusion such as medical necessity or experimental treatment, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

Effective January 1, 2018, a discussion of the decision, including an explanation of the basis for disagreeing with:

The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

A Social Security Administration disability determination regarding the claimant.

Effective January 1, 2018, if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, either (1) provide the specific rule, guideline, protocol or other similar criterion; or (2) include a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist. This is a change from the current rule that either the rule, guideline, protocol or other similar criterion must be provided or a statement can be included that such a rule, guideline, protocol or other criterion was relied on and will be made available upon request.

Effective January 1, 2018, a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.

Effective January 1, 2018, the notification must be provided in a culturally and linguistically appropriate manner, as described above.

Disability Appeal Denial Letter Content Checklist

Below is a checklist of appeal denial letter content requirements (those not effective until January 1, 2018 are noted).

The specific reason or reasons for the adverse determination.

Reference to the specific plan provisions on which the benefit determination is based.

A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.

A statement describing any voluntary appeal procedures offered by the plan and the claimant’s right to obtain the information about such procedures.

A statement of the claimant’s right to bring a civil action under ERISA.

If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

Effective January 1, 2018, a description of any applicable plan deadline to sue, including the calendar date on which the deadline to sue expires for the claim.

Effective January 1, 2018, a discussion of the decision, including an explanation of the basis for disagreeing with or not following:

The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant.

The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s claim denial, without regard to whether the advice was relied upon in making the benefit determination.

A Social Security Administration disability determination regarding the claimant presented by the claimant to the plan.

Effective January 1, 2018, either (1) the specific internal rule, guideline, protocol or other similar criterion that was relief on must be provided, or (2) a statement must be included that such a rule, guideline, protocol or other similar criterion was not provided because it does not exist. This is a change from the current rule that either the rule, guideline, protocol or other similar criterion must be provided or a statement can be provided that such a rule, guideline, protocol or other criterion was relied on and will be made available upon request.

Effective January 1, 2018, the notification must be provided in a culturally and linguistically appropriate manner, as described above.